Gen Xers may never be able to retire

Typical Generation Xers now in their late 30s to late 40s are suffering losses amounting to 45% of median net worth between 2007 and 2010. Based on other projections, typical Gen Xers are on track to replace half their pre-retirement income if they stop working at 65, compared to boomers (born between 1946 and 1955) who look set to replace 82% of income.

By Liam Pleven
May 21, 2013, 7:01 a.m. EDT
Market Watch

Typical Generation Xers now in their late 30s to late 40s saw their net worth drop by a larger proportion than older Americans during the financial crisis and came out of it less prepared for retirement than the post-World War II boomer generation, according to a new study.

Members of Generation X suffered losses amounting to 45% of median net worth between 2007 and 2010, a significantly higher percentage than those born in the 20 years immediately after the war, according to the Pew Charitable Trusts’ economic mobility project.

Based on income and other projections, typical Gen Xers are on track to replace half of their pre-retirement income if they stop working at 65, the study finds. Boomers born between 1946 and 1955 look set to replace 82% of income. Later boomers, born between 1956 and 1965, are on track to replace 59%.

Gen Xers are “facing a genuine possibility of downward mobility, if they don’t change course,” says Erin Currier, who heads the mobility project.

The results indicate that Gen Xers might need to take steps such as saving more and borrowing less if they want to maintain their living standard in their golden years, experts say.

The Pew study, released Thursday, is the latest to try to measure the impact of the financial crisis and to point specifically at damage to Generation X, which it defined as those born between 1966 and 1975 who are now 38 to 47 years old. Other Gen X definitions include people slightly older or younger.

The financial pain from the recession, the stock-market plunge in 2008 and the sharp fall in home values spread widely across many age groups. In dollar terms, baby boomers lost far more money than Gen X, according to the Pew study.

The proportion of households considered “at risk” of not being able to maintain the same standard of living in retirement went up significantly for people in their 30s, 40s and 50s between 2007 and 2010, according to a separate report by the Center for Retirement Research at Boston College, released in October.

Still, the proportion of 30- to 39-year-olds at risk was higher than for the other age groups both before and after the recession, researchers concluded.

In 2010, for instance, 62% of households led by people 30 to 39 were at risk, compared with 55% of those in their 40s, and 44% of those in their 50s.

Several factors are working against Gen X, says Andrew Eschtruth, a spokesman for the Center for Retirement Research. The cohort will bear the full brunt of the decision made decades ago to raise the age at which beneficiaries can get full Social Security benefits to 67, up from 65, he notes.

Life expectancy is also rising, meaning assets might well have to last longer. Many Gen Xers will also have to rely on defined-contribution plans, such as 401(k)s, instead of traditional pension plans, Mr. Eschtruth says.

“They have plenty of time to change and adjust,” he says. “But it’s going to be hard.”

One reason for hope: rebounds in home prices and the stock market in recent years. The Pew study is based on data through 2010, and many Gen Xers who owned or bought homes and kept or made investments in the stock market when prices were low might be in a better position now, says Karen Smith, a senior fellow at the Urban Institute who has studied the impact of the recession and retirement preparedness.

“As long as they didn’t sell stocks and they continue to contribute to their retirement accounts, they could come out winners,” she says. “I actually am somewhat optimistic.”

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